India's Energy Security Gets a Reset: ONGC May Build New Strategic Oil Reserve

State-run Oil and Natural Gas Corporation (ONGC) is planning to develop and fill India's next strategic petroleum reserve (SPR) facility under a government-directed initiative aimed at strengthening the country's energy security, according to a report by The Economic Times.

The proposed project comes in the aftermath of the Iran conflict, which highlighted India's vulnerability to global supply disruptions and underscored the limited size of its strategic crude reserves.

According to the report, ONGC has been asked to develop a 1.75 million metric tonne (MMT) underground crude storage cavern in Mangaluru, Karnataka. Once completed, the facility would increase India's existing strategic petroleum reserve capacity of 5.33 MMT by nearly one-third.

Sources cited in the report said ONGC may need to invest around ₹15,000 crore ($1.6 billion) in the project. Of this, approximately ₹5,000 crore would be required for construction, while another ₹10,000 crore could be needed to procure crude oil and fill the storage facility at current prices.

The Mangaluru project would mark the first time a state-owned oil producer has been tasked with developing a strategic petroleum reserve. ONGC already owns the land earmarked for the facility, potentially accelerating the project's execution.

However, it remains unclear how the company would recover its investment or whether the facility would operate solely as a strategic reserve or include a commercial component.

India's Strategic Reserves Remain Limited

India currently maintains three strategic petroleum reserve facilities operated by Indian Strategic Petroleum Reserves Ltd (ISPRL), a government-owned special purpose vehicle.

The existing facilities are located at Visakhapatnam in Andhra Pradesh with a capacity of 1.33 MMT, and Mangaluru and Padur in Karnataka with capacities of 1.5 MMT and 2.5 MMT, respectively.

Despite being the world's third-largest oil consumer, India's strategic reserves remain modest compared with other major economies. The country consumes roughly 5 million barrels of crude oil per day, while its current SPR capacity of 5.33 million tonnes, equivalent to about 39 million barrels, is significantly lower than that of countries such as China, the United States and Japan.

According to data from the US Energy Information Administration, India held only 21 million barrels of strategic crude stocks at the end of 2025, compared with 1,397 million barrels in China, 413 million barrels in the United States, and 263 million barrels in Japan.

Shift Towards Commercialisation

India's strategic reserves were initially conceived as purely emergency stockpiles. However, the government revised its approach in 2021 by allowing ISPRL to commercially utilise part of the storage capacity.

Under the policy, up to 30% of capacity can be leased to refiners and traders, while 20% of stored crude can be used for trading activities, helping improve the economic viability of the reserves.

The government has also adopted a public-private partnership model for the next phase of strategic reserve expansion, which includes planned facilities at Chandikhol in Odisha (4 MMT) and Padur in Karnataka (2.5 MMT).

The proposed ONGC-led project signals a broader reassessment of India's energy security strategy as policymakers seek to build larger buffers against future geopolitical disruptions and supply shocks.